460 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

*
G.R. No. 158907. February 12, 2007.

EDUARDO B. OLAGUER, petitioner, vs. EMILIO

PURUGGANAN, JR. AND RAUL LOCSIN, respondents.

Civil Law; Powers of Attorney; Agency; It is a general rule that a

power of attorney must be strictly construed; the instrument will be held to
grant only those powers that are specified, and the agent may neither go
beyond nor deviate from the power of attorney.—Petitioner’s arguments are
unpersuasive. It is a general rule that a power of attorney must be strictly
construed; the instrument will be held to grant only those powers that are
specified, and the agent

_______________

* THIRD DIVISION.

461

VOL. 515, FEBRUARY 12, 2007 461

Olaguer vs. Purugganan, Jr.

may neither go beyond nor deviate from the power of attorney. However,
the rule is not absolute and should not be applied to the extent of destroying
the very purpose of the power. If the language will permit, the construction
that should be adopted is that which will carry out instead of defeat the
purpose of the appointment. Clauses in a power of attorney that are
repugnant to each other should be reconciled so as to give effect to the
instrument in accordance with its general intent or predominant purpose.
Furthermore, the instrument should always be deemed to give such powers
as essential or usual in effectuating the express powers.

Same; Same; Same; In the present case, limiting the definitions of

“absence” to that provided under Article 381 of the Civil Code and of
“incapacity” under Article 38 of the same Code negates the effect of the
power of attorney by creating absurd, if not impossible, legal situations.—In
the present case, limiting the definitions of “absence” to that provided under
Article 381 of the Civil Code and of “incapacity” under Article 38 of the
same Code negates the effect of the power of attorney by creating absurd, if
not impossible, legal situations. Article 381 provides the necessarily
stringent standards that would justify the appointment of a representative by
a judge. Among the standards the said article enumerates is that no agent
has been appointed to administer the property. In the present case, petitioner
himself had already authorized agents to do specific acts of administration
and thus, no longer necessitated the appointment of one by the court.
Likewise, limiting the construction of “incapacity” to “minority, insanity,
imbecility, the state of being a deaf-mute, prodigality and civil interdiction,”
as provided under Article 38, would render the SPA ineffective. Article
1919(3) of the Civil Code provides that the death, civil interdiction, insanity
or insolvency of the principal or of the agent extinguishes the agency. It
would be equally incongruous, if not outright impossible, for the petitioner
to require himself to qualify as a minor, an imbecile, a deaf-mute, or a
prodigal before the SPA becomes operative. In such cases, not only would
he be prevented from appointing an agent, he himself would be unable to
administer his property.

Same; Same; Same; Defining the terms “absence” and “incapacity” by

their everyday usage makes for a reasonable construction, that is, “the state
of not being present and the inability to act,” given the context that the
Special Power of Attorney (SPA) authorizes the

462

462 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

agents to attend stockholders’ meeting and vote in behalf of petitioner, to
sell the shares of stock, and other related acts.—Defining the terms
“absence” and “incapacity” by their everyday usage makes for a reasonable
construction, that is, “the state of not being present” and the “inability to
act,” given the context that the SPA authorizes the agents to attend
stockholders’ meetings and vote in behalf of petitioner, to sell the shares of
stock, and other related acts. This construction covers the situation wherein
petitioner was arrested and detained. This much is admitted by petitioner in
his testimony.

Same; Same; Same; Article 1882 of the Civil Code provides that the
limits of an agent’s authority shall not be considered exceeded should it
have been performed in a manner advantageous to the principal than that
specified by him.—Article 1882 of the Civil Code provides that the limits of
an agent’s authority shall not be considered exceeded should it have been
performed in a manner more advantageous to the principal than that
specified by him.

Same; Same; Same; The prohibition against agents purchasing

property in their hands for sale or management is, however, clearly, not
absolute.—It is, indeed, a familiar and universally recognized doctrine that a
person who undertakes to act as agent for another cannot be permitted to
deal in the agency matter on his own account and for his own benefit
without the consent of his principal, freely given, with full knowledge of
every detail known to the agent which might affect the transaction. The
prohibition against agents purchasing property in their hands for sale or
management is, however, clearly, not absolute. It does not apply where the
principal consents to the sale of the property in the hands of the agent or
administrator.

PETITION for review on certiorari of a decision of the Court of

Appeals.
The facts are stated in the opinion of the Court.
     Castillo, Laman, Tan, Pantaleon and San Jose for petitioner.
     Tan, Acut and Lopez Law Offices for respondent Raul Locsin.
     Melanio L. Soreta for respondent Dr. Purugganan.

463

VOL. 515, FEBRUARY 12, 2007 463

Olaguer vs. Purugganan, Jr.
CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari, under Rule 45 of the

1
Rules of Court, assailing the Decision, dated 30 June 2003,
promulgated by the Court of Appeals, affirming the Decision of the
Regional Trial Court, dated 26 July 1995, dismissing the petitioner’s
suit.
The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUER’S VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of

60,000 shares of stock of Businessday Corporation (Businessday)
with a total par value of P600,000.00, with Certificates of Stock No.
2
005, No. 028, No. 034, No. 070, and No. 100. At the time he was
employed with the corporation as Executive Vice-President of
Businessday, and President of Businessday Information Systems and
Services and of Businessday Marketing Corporation, petitioner,
together with respondent Raul Locsin (Locsin) and Enrique Joaquin
(Joaquin), was3
active in the political opposition against the Marcos
dictatorship. Anticipating the possibility that petitioner would be
arrested and detained by the Marcos military, Locsin, Joaquin, and
Hector Hofileña had an unwritten agreement that, in the event that
petitioner was arrested, they would support 4
the petitioner’s family
by the continued payment of his salary. Petitioner also executed a
Special Power of Attorney (SPA), on 26 May 1979, appointing as
his attorneys-in-fact Locsin, Joaquin and Hofileña for the purpose of
selling or transferring petitioner’s shares of stock with Businessday.
During the trial, petitioner testified that he agreed

_______________

1 Penned by Associate Justice Ruben T. Reyes with Associate Justices Elvi John S.
Assuncion and Lucas P. Bersamin, concurring; Rollo, pp. 70-86.
2 Id., at p. 71.
3 Id., at pp. 18-19.
4 Id., at p. 19.

464

464 SUPREME COURT REPORTS ANNOTATED

 Olaguer vs. Purugganan, Jr.

to execute the SPA in order to cancel his shares of stock, even before
they are sold, for the purpose of concealing that he was a
stockholder of Businessday,
5
in the event of a military crackdown
against the opposition. The parties acknowledged the SPA before
respondent Emilio Purugganan, Jr., who was then the Corporate
Secretary of 6Businessday, and at the same time, a notary public for
Quezon City.
On 24 December 1979, petitioner was arrested by the Marcos
military by virtue of an Arrest, Search and Seizure Order and
detained for allegedly committing arson. During the petitioner’s
detention, respondent Locsin ordered fellow respondent Purugganan
to cancel the petitioner’s shares in the books 7of the corporation and
to transfer them to respondent Locsin’s name.
As part of his scheme to defraud the petitioner, respondent
Locsin sent Rebecca Fernando, an employee of Businessday, to
Camp Crame where the petitioner was detained, to pretend to
borrow Certificate of Stock No. 100 for the purpose of using it as
additional collateral for Businessday’s then outstanding loan with
the National Investment and Development Corporation. When
Fernando returned the borrowed stock certificate, the word
“cancelled” was already written therein. When the petitioner became
upset, Fernando explained that this was merely a mistake committed
8
by respondent Locsin’s secretary.
During the trial, petitioner also agreed to stipulate that from 1980
to 1982, Businessday made regular deposits, each amounting to
P10,000.00, to the Metropolitan Bank and Trust Company accounts
of Manuel and Genaro Pantig, petitioner’s in-laws. The deposits
were made on every 15th and 30thof the

_______________

5 Records, Volume 1, pp. 217-218.

6 Rollo, p. 19.
7 Id., at p. 20.
8 Id., at pp. 20-21.

465

VOL. 515, FEBRUARY 12, 2007 465

 Olaguer vs. Purugganan, Jr.

9
month. Petitioner alleged that these funds consisted of his monthly
salary, which Businessday agreed to continue
10
paying after his arrest
for the financial support of his family. After receiving a total of
P600,000.00, the payments stopped. Thereafter, respondent Locsin
and Fernando went to ask petitioner to endorse and deliver the rest
of his 11stock certificates to respondent Locsin, but petitioner
refused.
On 16 January 1986, petitioner was finally released from
detention. He then discovered that he was no longer registered as
stockholder of Businessday in its corporate books. He also learned
that Purugganan, as the Corporate Secretary of Businessday, had
already recorded the transfer of shares in favor of respondent
Locsin, while petitioner was detained. When petitioner demanded
that respondents restore to him full ownership of his shares of stock,
they refused to do so. On 29 July 1986, petitioner filed a Complaint
before the trial court against respondents Purugganan and Locsin to
declare as illegal the sale of the shares of stock, to restore to12the
petitioner full ownership of the shares, and payment of damages.

RESPONDENT RAUL LOCSIN’S VERSION

In his version of the facts, respondent Locsin contended that

petitioner approached him and requested him to sell, and, if
necessary, buy petitioner’s shares of stock in Businessday, to assure
support for petitioner’s family in the event that something should
happen to him,13
particularly if he was jailed, exiled or forced to go
underground. At the time petitioner was employed with
Businessday, respondent Locsin was unaware that petitioner was
part of a group, Light-a-Fire

_______________

9 Records, Volume II, pp. 519-520.

10 Rollo, pp. 21-22.
11 Id., at p. 23.
12 Id., at pp. 23-24.
13 Id., at pp. 925-926.

466
466 SUPREME COURT REPORTS ANNOTATED
Olaguer vs. Purugganan, Jr.

Movement, which actively sought the 14overthrow of the Marcos

government through an armed struggle. He denied that he made
any arrangements to continue paying 15
the petitioner’s salary in the
event of the latter’s imprisonment.
When petitioner was detained, respondent Locsin tried to sell
petitioner’s shares, but nobody wanted to buy them. Petitioner’s
reputation as an oppositionist resulted in the poor financial condition16
of Businessday and discouraged any buyers for the shares of stock.
In view of petitioner’s previous instructions, respondent Locsin
decided to buy the shares himself. Although the capital deficiency
suffered by Businessday caused the book value of the shares to
plummet below par value, respondent Locsin, nevertheless, bought
17
the shares at par value. However, he had to borrow from
Businessday the funds he used in purchasing the shares from
petitioner, and had to pay the petitioner 18 in installments of
P10,000.00 every 15th and 30th of each month.
The trial court in its Decision, dated 26 July 1995, dismissed the
Complaint filed by the petitioner. It ruled that the sale of shares
between petitioner and respondent Locsin was valid. The trial court
concluded that petitioner had intended to sell the shares of stock to
anyone, including respondent Locsin, in order to provide for the
needs of his family should he be jailed or forced to go underground;
and that the SPA drafted by the petitioner empowered respondent
Locsin, and two other agents, to sell the shares for such price and
under such terms and conditions that the agents may deem proper. It
further found that petitioner consented to have respondent Locsin
buy the shares himself. It also ruled that petitioner, through his wife,
received from respondent Locsin the amount

_______________

14 Id., at pp. 927-928.

15 Id., at p. 928.
16 Id., at pp. 929-930.
17 Id., at pp. 930-931.
18 Id., at p. 933.

467
 VOL. 515, FEBRUARY 12, 2007 467
Olaguer vs. Purugganan, Jr.

19
of P600,000.00 as payment for the shares of stock. The dispositive
part of the trial court’s Decision reads:

“WHEREFORE, for failure of the [herein petitioner] to prove by

preponderance of evidence, his causes of action and of the facts alleged in
his complaint, the instant suit is hereby ordered DISMISSED, without
pronouncement as to costs.
[Herein respondents’] counterclaims, however, are hereby DISMISSED,
20
likewise, for dearth of substantial evidentiary support.”

On appeal, the Court of Appeals affirmed the Decision of the trial

21
court that there was a perfected contract of sale. It further ruled that
granting that there was no perfected contract of sale, petitioner,
nevertheless, ratified the sale to respondent Locsin by his receipt of
the purchase
22
price, and his failure to raise any protest over the said
sale. The Court of Appeals refused to credit the petitioner’s
allegation that the money his wife received constituted his salary
from Businessday since the amount he received as his salary,
P24,000.00 per month, did not correspond to the amount he received
during his detention, P20,000.00 per month (deposits of P10,000.00
on every 15th and 30th of each month in the accounts of the
petitioner’s in-laws). On the other hand, the total amount received,
P600,000.00, corresponds to the aggregate par value of petitioner’s
shares in Businessday. Moreover, the financial condition of
Businessday prevented it from granting any form of financial
assistance in favor of the petitioner, who was placed in an23 indefinite
leave of absence, and, therefore, not entitled to any salary.
The Court of Appeals also ruled that although the manner of the
cancellation of the petitioner’s certificates of stock and

_______________

19 CA Rollo, pp. 818-822.

20 Records, Vol. II, p. 822.
21 Rollo, pp. 76-79.
22 Id., at p. 80.
23 Id., at pp. 81-82.

468
468 SUPREME COURT REPORTS ANNOTATED
Olaguer vs. Purugganan, Jr.

the subsequent issuance of the new certificate of stock in favor of

respondent Locsin was irregular, this irregularity will
24
not relieve
petitioner of the consequences of a consummated sale.
Finally, the Court of Appeals affirmed the Decision of the trial
court disallowing respondent Locsin’s claims for25 moral and
exemplary damages due to lack of supporting evidence.
Hence, the present petition, where the following issues were
raised:

I.

THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A

PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND
MR. LOCSIN OVER THE SHARES;

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER

CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR.
LOCSIN;

III.

THE APPELLATE COURT ERRED IN RULING THAT THE

AMOUNTS RECEIVED BY PETITIONER’S IN LAWS WERE NOT
PETITIONER’S SALARY FROM THE CORPORATION BUT
INSTALLMENT PAYMENTS FOR THE SHARES;

IV.

THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN

WAS THE PARTY TO THE ALLEGED SALE OF THE SHARES AND
NOT THE CORPORATION; AND

V.

THE APPELLATE COURT ERRED IN RULING THAT THE

ALLEGED SALE OF THE SHARES WAS VALID ALTHOUGH THE
26
CANCELLATION OF THE SHARES WAS IRREGULAR.

_______________
 24 Id., at pp. 83-84.
25 Id., at p. 85.
26 Id., at pp. 29-30.

469

VOL. 515, FEBRUARY 12, 2007 469

Olaguer vs. Purugganan, Jr.

The petition is without merit.

The first issue that the petitioner raised is that there was no valid
27
sale since respondent Locsin exceeded his authority under the SPA
issued in his, Joaquin and Hofileña’s favor. He alleged that the
authority of the aforenamed agents to sell

_______________

27 Id., at pp. 199-200. The Special Power of Attorney executed by petitioner on 26

May 1979 reads:

KNOW ALL MEN BY THESE PRESENTS:

THAT I, EDUARDO B. OLAGUER, of legal age, x x x, have named, appointed and

constituted, and by these presents, do hereby name, constitute and appoint Messers. RAUL L,
LOCSIN, ENRIQUE M. JOAQUIN, and HECTOR HOFILEÑA, all of legal age and with
business address c/o Businessday Corporation, 113 West Avenue, Quezon City, jointly and
individually, to be my true and lawful attorneys-in-fact, for me and in my name, place and
stead, in the event of my absence or incapacity, to do or perform any or all of the following acts
and things, to wit:
1. For me and in my stead to attend and vote my stock at any stockholders’ meeting of the
Businessday Group of Companies, consisting of the Businessday Corporation, Businessday
Information Systems & Services, Inc., and Businessday Marketing Corporation, of all of which
I am a stockholder, and to take such action as may be in my interest as fully as I could do if
personally present, and for this purpose to sign and execute any proxies or other instruments in
my name or on my behalf, appointing my said attorneys, or any one of them, or any other
person as my proxy or proxies;
2. To sell, assign, transfer, endorse and deliver, for such price or prices, and under such
terms and conditions, as my said attorneys-in-fact may deem proper, any and all shares of stock
now held or which may hereafter be held by me in the aforesaid companies; to receive payment
or payments from the buyer; buyers thereof; to make, execute and deliver receipts for such
payments; and to apply the net proceeds of any such sale, assignment and transfer to the
liquidation of and satisfaction for any and all obligations that I may have with the said
companies.

470

470 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

the shares of stock was limited to the following conditions: (1) in the
event of the petitioner’s absence and incapacity; and (2) for the
limited purpose of applying the proceeds of the sale to the
satisfaction of petitioner’s
28
subsisting obligations with the companies
adverted to in the SPA.
Petitioner sought to impose a strict construction of the SPA by
limiting the definition of the word “absence” to a condition wherein
“a person disappears from his domicile, his whereabouts being 29
unknown, without leaving an agent to administer his property,”
citing Article 381 of the Civil Code, the entire provision hereunder
quoted:

“ART. 381. When a person disappears from his domicile, his whereabouts
being unknown, and without leaving an agent to administer his property, the
judge, at the instance of an interested party, a relative, or a friend, may
appoint a person to represent him in all that may be necessary.
This same rule shall be observed when under similar circumstances the
power conferred by the absentee has expired.”

Petitioner also puts forward that the word “incapacity” would be

limited to mean “minority, insanity, imbecility,
30
the state of being
deaf-mute, prodigality and civil interdiction.” He cites Article 38
of the Civil Code, in support of this definition, which is hereunder
quoted:

“ART. 38. Minority, insanity or imbecility, the state of being a deaf-mute,

prodigality and civil interdiction are mere restrictions on capacity to act, and
do not exempt the incapacitated person, from certain obligations, as when
the latter arise from his acts or from property relations, such as easements.”

Petitioner, thus, claims that his arrest and subsequent detention are
not among the instances covered by the terms “ab-

_______________
 28 Rollo, p. 31.
29 Id.
30 Id., at pp. 31-32.

471

VOL. 515, FEBRUARY 12, 2007 471

Olaguer vs. Purugganan, Jr.

sence or incapacity,” as provided under the SPA he executed in favor

of respondent Locsin.
Petitioner’s arguments are unpersuasive. It is a general rule that a
power of attorney must be strictly construed; the instrument will be
held to grant only those powers that are specified, and the agent may
neither go beyond nor deviate from the power of attorney. However,
the rule is not absolute and should not be applied to the extent of
destroying the very purpose of the power. If the language will
permit, the construction that should be adopted is that which will
carry out instead of defeat the purpose of the appointment. Clauses
in a power of attorney that are repugnant to each other should be
reconciled so as to give effect to the instrument in accordance with
its general intent or predominant purpose. Furthermore, the
instrument should always be deemed to give such 31
powers as
essential or usual in effectuating the express powers.
In the present case, limiting the definitions of “absence” to that
provided under Article 381 of the Civil Code and of “incapacity”
under Article 38 of the same Code negates the effect of the power of
attorney by creating absurd, if not impossible, legal situations.
Article 381 provides the necessarily stringent standards that would
justify the appointment of a representative by a judge. Among the
standards the said article enumerates is that no agent has been
appointed to administer the property. In the present case, petitioner
himself had already authorized agents to do specific acts of
administration and thus, no longer necessitated the appointment of
one by the court. Likewise, limiting the construction of “incapacity”
to “minority, insanity, imbecility, the state of being a deaf-mute,
prodigality and civil interdiction,” as provided under Article 38,
would render the SPA ineffective. Article 1919(3) of the Civil Code
provides that the death, civil interdiction, insanity or insolvency of
the principal or of the agent extinguishes the agency. It would be
equally incongruous, if not outright im-
_______________

31 3 Am. Jur. 2d, 536-537.

472

472 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

possible, for the petitioner to require himself to qualify as a minor,

an imbecile, a deaf-mute, or a prodigal before the SPA becomes
operative. In such cases, not only would he be prevented from
appointing an agent, he himself would be unable to administer his
property.
On the other hand, defining the terms “absence” and “incapacity”
by their everyday usage makes for a reasonable construction, that is,
“the state of not being present” and the “inability to act,” given the
context that the SPA authorizes the agents to attend stockholders’
meetings and vote in behalf of petitioner, to sell the shares of stock,
and other related acts. This construction covers the situation wherein
petitioner was arrested and 32
detained. This much is admitted by
petitioner in his testimony.
Petitioner’s contention that the shares may only be sold for the
sole purpose of applying the proceeds of the sale to the satisfaction
of petitioner’s subsisting obligations to the company is far-fetched.
The construction, which will carry out the purpose, is that which
should be applied. Petitioner had not submitted evidence that he was
in debt with Businessday at the time he had executed the SPA. Nor
could he have considered incurring any debts since he admitted that,
at the time of its execution, he was concerned about his possible
arrest, death and disappearance. The language of the SPA clearly
enumerates, as among those acts that the agents were authorized to
do, the act of applying the proceeds of the sale of the shares to any
obligations petitioner might have against the Businessday group of
companies. This interpretation is supported by the use of the word
“and” in enumerating the authorized acts, instead of phrases such as
“only for,” “for the purpose of,” “in order to” or any similar terms to
indicate that

_______________
 32 Records, Volume I, p. 188.

Q: In other words Mr. Witness, it is not correct to conclude that when you executed
that special power of attorney, you contemplated your possible arrest at that time?
A: Arrest, death and disappearance.

473

VOL. 515, FEBRUARY 12, 2007 473

Olaguer vs. Purugganan, Jr.

the petitioner intended that the SPA be used only for a limited
purpose, that of paying any liabilities with the Businessday group of
companies.
Secondly, petitioner argued that the records failed to show that he
gave his consent to the sale of the shares to respondent Locsin for
the price of P600,000.00. This argument is unsustainable. Petitioner
received from respondent Locsin, through his wife and in-laws, the
installment payments for a total of P600,000.00 from 1980 to 1982,
without any protest or complaint. It was only four years after 1982
when petitioner demanded the return of the shares. The petitioner’s
claim that he did not instruct respondent Locsin to deposit the
money to the bank accounts of his in-laws fails to prove that
petitioner did not give his consent to the sale since respondent
Locsin was authorized, under the SPA, to negotiate the terms and
conditions of the sale including the manner of payment. Moreover,
had respondent Locsin given the proceeds directly to the petitioner,
as the latter suggested in this petition, the proceeds were likely to
have been included among petitioner’s properties which were
confiscated by the military. Instead, respondent Locsin deposited the
money in the bank accounts of petitioner’s in-laws, and
consequently, assured that the petitioner’s wife received these
amounts. Article 1882 of the Civil Code provides that the limits of
an agent’s authority shall not be considered exceeded should it have
been performed in a manner more advantageous to the principal than
that specified by him.
In addition, petitioner made two inconsistent statements when he
alleged that (1) respondent Locsin had not asked the petitioner to
endorse and deliver the shares of stock, and (2) when Rebecca
Fernando asked the petitioner to endorse and deliver the 33certificates
of stock, but petitioner refused and even became upset. In either
case, both statements only prove that petitioner refused to honor his
part as seller of the

_______________

33 Rollo, pp. 34, 1929.

474

474 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

shares, even after receiving payments from the buyer. Had the
petitioner not known of or given his consent to the sale, he would
have given back the payments as soon as Fernando asked him to
endorse and deliver the certificates of stock, an incident which
unequivocally confirmed that the funds he received, through his wife
and his in-laws, were intended as payment for his shares of stocks.
Instead, petitioner held on to the proceeds of the sale after it had
been made clear to him that respondent Locsin had considered the
P600,000.00 as payment for the shares, and asked petitioner, through
Fernando, to endorse and deliver the stock certificates for
cancellation.
As regards the third issue, petitioner’s allegation that the
installment payments he was adjudged to have received for the
shares were actually salaries which Businessday promised to pay
him during his detention is unsupported and implausible. Petitioner
received P20,000.00 per month through his in-laws; this 34
amount
does not correspond to his monthly salary at P24,000.00. Nor does
the amount received correspond to the amount which Businessday
was supposed to be obliged to pay 35petitioner, which was only
P45,000.00 to P60,000.00 per annum. Secondly, the petitioner’s
wife did not receive funds from respondent Locsin or Businessday
for the entire duration of petitioner’s detention. Instead, when the
total amount received by the petitioner reached the aggregate
amount of his shares at par value—P600,000.00—the payments
stopped. Petitioner even testified that when respondent Locsin
denied knowing the petitioner soon after his arrest, he believed
respondent Locsin’s commitment to pay his

_______________
 34 Records, Volume I, p. 196. Petitioner confirmed the Court of Appeal’s factual
finding that he received a monthly salary of P24,000.00 when he testified receiving an
equivalent amount estimated at P250,000.00 to $300,000.00 per annum.
35 Id., at pp. 194-195.

475

VOL. 515, FEBRUARY 12, 2007 475

Olaguer vs. Purugganan, Jr.

36
salaries during his detention to be nothing more than lipservice.
Granting that petitioner was able to prove his allegations, such an
act of gratuity, on the part of Businessday in favor of petitioner,
would be void. An arrangement whereby petitioner will receive
“salaries” for work he will not perform, which is not a demandable
debt since petitioner was on an extended 37
leave of absence,
constitutes a donation under Article 726 of the Civil Code. Under
Article 748 of the Civil Code, if the value of the personal property
donated exceeds P5,000.00, the donation and the acceptance shall
have to be made in writing. Otherwise, the donation will38be void. In
the present case, petitioner admitted in his testimony that such
arrangement was not made in writing and, hence, is void.
The fact that some of the deposit slips and communications made
to petitioner’s wife contain the phrase “household expenses” does
not disprove the sale of the shares. The money was being deposited
to the bank accounts of the petitioner’s in-laws, and not to the
account of the petitioner or his wife, precisely because some of his
property had already been confiscated by the military. Had they used
the phrase “sale of shares,” it would have defeated the purpose of
not using their own bank accounts, which was to conceal from the
military any transaction involving the petitioner’s property.
Petitioner raised as his fourth issue that granting that there was a
sale, Businessday, and not respondent Locsin, was the party to the
transaction. The curious facts that the payments were received on
the 15th and 30th of each month and that the payor named in the
checks was Businessday,

_______________

36 Id., at p. 240.
 37 ART. 726. When a person gives to another a thing or right on account of the
latter’s merits or of the services rendered by him to the donor, provided they do not
constitute a demandable debt, or when the gift imposes upon the donee a burden
which is less than the value of the thing given, there is also a donation.
38 Records, Volume I, p. 243.

476

476 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

were adequately explained by respondent Locsin. Respondent

Locsin had obtained cash advances from the company, paid to him
on the 15th and 30th of the month, so that he can pay petitioner for
the shares. To support his claim, he presented Businessday’s
financial records and the testimony of Leo Atienza, the Company’s
Accounting Manager. When asked why the term “shares of stock”
was used for the entries, instead of “cash advances,” Atienza
explained that the term “shares of stock” 39was more specific rather
than the broader phrase “cash advances.” More to the point, had
the entries been for “shares of stock,” the issuance of shares should
have been reflected in the stock and transfer books of Businessday,
which the petitioner presented as evidence. Instead the stock and
transfer books reveal that the increase in respondent Locsin’s shares
was a result of the cancellation and transfer of petitioner’s shares in
favor of respondent Locsin.
Petitioner alleges that the purported sale between himself and
respondent Locsin of the disputed shares of stock is void since it
contravenes Article 1491 of the Civil Code, which provides that:

“ART. 1491. The following persons cannot acquire by purchase, even at a

public or judicial auction, either in person or through the mediation of
another: x x x x
(2) Agents, the property whose administration or sale may have been
entrusted to them, unless the consent of the principal has been given; x x x.”

It is, indeed, a familiar and universally recognized doctrine that a

person who undertakes to act as agent for another cannot be
permitted to deal in the agency matter on his own account and for
his own benefit without the consent of his principal, freely given,
with full knowledge of every detail
_______________

39 Records, TSN Duplicate, p. 2087.

477

VOL. 515, FEBRUARY 12, 2007 477

Olaguer vs. Purugganan, Jr.

40
known to the agent which might affect the transaction. The
prohibition against agents purchasing property in their hands for sale
or management is, however, clearly, not absolute. It does not apply
where the principal consents41to the sale of the property in the hands
of the agent or administrator.
In the present case, the parties have conflicting allegations. While
respondent Locsin averred that petitioner had permitted him to
purchase petitioner’s shares, petitioner vehemently denies having
known of the transaction. However, records show that petitioner’s
position is less credible than that taken by respondent
42
Locsin given
petitioner’s contemporaneous and subsequent acts. In 1980, when
Fernando returned a stock certificate she borrowed from the
petitioner, it was marked “cancelled.” Although the petitioner
alleged that he was furious when he saw the word cancelled, he had
not demanded the issuance of a new certificate in his name. Instead
of having been put on his guard, petitioner remained silent over this
obvious red flag and continued receiving, through his wife,
payments which totalled to the aggregate amount of the shares of
stock valued at par. When the payments stopped, no demand was
made by either petitioner or his wife for further payments.
From the foregoing, it is clear that petitioner knew of the
transaction, agreed to the purchase price of P600,000.00 for the
shares of stock, and had in fact facilitated the implementation of the
terms of the payment by providing respondent Locsin, through
petitioner’s wife, with the information on the bank accounts of his
in-laws. Petitioner’s wife and his son

_______________

40 3 Am. Jur. 2d, pp. 727-728.

41 Distajo v. Court of Appeals, 393 Phil. 426, 433; 339 SCRA 52, 57 (2000);
Pelayo v. Perez, G.R. No. 141323, 8 June 2005, 459 SCRA 475, 487-488.
 42 Article 1371 of the Civil Code provides that: ART. 1371. In order to judge the
intention of the contracting parties, their contemporaneous and subsequent acts shall
be principally considered.

478

478 SUPREME COURT REPORTS ANNOTATED

Olaguer vs. Purugganan, Jr.

even provided receipts43

for the payments that were made to them by
respondent Locsin, a practice that bespeaks of an onerous
transaction and not an act of gratuity.
Lastly, petitioner claims that the cancellation of the shares and
the subsequent transfer thereof were fraudulent, and, therefore,
illegal. In the present case, the shares were transferred in the name
of the buyer, respondent Locsin, without the petitioner delivering to
the buyer his certificates of stock. Section 63 of the Corporation
Code provides that:

“Sec. 63. Certificate of stock and transfer of shares.—x x x Shares of stock

so issued are personal property and may be transferred by delivery of the
certificate or certificates indorsed by the owner or his attorney-in-fact or
other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in
the books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.” (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of

shares—the delivery of the endorsed certificates, in order to prevent
the fraudulent transfer of shares of stock. However, this rule cannot
be applied in the present case without causing the injustice sought to
be avoided. As had been amply demonstrated, there was a valid sale
of stocks. Petitioner’s failure to deliver the shares to their rightful
buyer is a breach of his duty as a seller, which he cannot use to
unjustly profit himself by denying the validity of such sale. Thus,
while the manner of the cancellation of petitioner’s certificates of
stock and the issuance of the new certificates in favor of respondent
Locsin was highly irregular, we must, nonetheless, declare the
validity of the sale between the parties. Neither does this irregularity
prove that the transfer was fraudulent. In his testimony, petitioner
admitted that they had intended to conceal his being a stockholder of
Business-

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43 TSN, 28 January 1992, pp. 2208-2209.

479

VOL. 515, FEBRUARY 12, 2007 479

Olaguer vs. Purugganan, Jr.

44
day. The cancellation of his name from the stock and transfer book,
even before the shares were actually sold, had been done with his
consent. As earlier explained, even the subsequent sale of the shares
in favor of Locsin had been done with his consent.
IN VIEW OF THE FOREGOING, the instant Petition is
DENIED. This Court AFFIRMS the assailed Decision of the Court
of Appeals, promulgated on 30 June 2003, affirming the validity of
the sale of the shares of stock in favor of respondent Locsin. No
costs.
SO ORDERED.

          Ynares-Santiago (Chairp erson), Austria-Martinez and

Callejo, Sr., JJ., concur.
     Nachura, J., On Leave.

Petition denied, assailed decision affirmed.

Notes.—The prohibition in par. 2 of Art. 1491 of the Civil Code

against agents purchasing property in their hands for sale or
management does not apply if the principal consents to the sale of
the property in the hands of the agent or administrator. (Pelayo vs.
Perez, 459 SCRA 475 [2005])
The acts of an agent beyond the scope of his authority do not
bind the principal, unless he ratifies them, expressly or impliedly.
(Manila Memorial Park Cemetery, Inc. vs. Linsangan, 433 SCRA
376 [2004])

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